Meet Scandinavia’s Answer to Richard Branson

DJX used an exclusive interview with Norwegian Air Shuttle CEO Bjørn Kjos to get ahead of the company’s plan to order more Boeing 787 Dreamliners and ambition to court budget-oriented U.S. partners.

Here is how the full story appeared on DJX:

DJ Meet Scandinavia’s Answer To Richard Branson

By Gustav Sandstrom

Bjorn Kjos believes the world’s next great budget airline is in Norway.

Mr. Kjos, the chief executive and founder of Norwegian Air Shuttle ASA, may be Scandinavia’s answer to Richard Branson. Like the Virgin Group Ltd. founder, he’s trying to build a long-haul carrier aimed at leisure travelers. And just as Mr. Branson has his quirks, Mr. Kjos does, too — in 2006, he published “The Murmansk Affair,” a spy thriller.

Mr. Kjos is also a gambler. Last year, he placed a $21 billion order for 222 Boeing and Airbus jets, the biggest ever for a European carrier and a key component of his plan to transition the decade-old Norwegian from a regional carrier to a global giant.

Capturing the leisure-travel market will be vital to Norwegian’s success, and Mr. Kjos is feeling out U.S. partners and preparing for battle with competitors such as British Airways and Scandinavian airline SAS, offering rock-bottom prices that he thinks will eventually become standard. Among the deals, he says, will be one-way flights between London and New York starting at $292 next summer. That includes some amenities: Norwegianprovides in-flight Wi-Fi free, but charges for a cup of coffee.

The Wall Street Journal spoke with the 67-year-old entrepreneur about Norwegian’s flight plans. Edited excerpts:
WSJ: How does Norwegian grow and remain low-cost?

Mr. Kjos: Our growth engine will be Asia. But there are low-hanging fruits also in American cities underserved by direct flights [from much of Europe]. In the future, the leisure market is what will be growing, especially Asians who start flying because of income growth.

Eighty-five percent of the long-haul market today is leisure, rather than business. If you cannot compete in the leisure segment, then you’ll have problems. You must be able to offer cheap flights.
WSJ: You’ve had to make changes to open the door for this growth.

Mr. Kjos: For most Asian cities, you need bilateral agreements to fly there, to get the permits. We moved our long-haul operations to Ireland to get access to the EU’s bilateral agreements. In the future you will have an open sky between Asia and Europe — I’m certain about that because it creates so many jobs on the ground.
WSJ: The European airline market has suffered from overcapacity and low profitability. How do you see the market developing?

Mr. Kjos: A lot of the overcapacity comes from high-cost legacy carriers [that] would have been out of business a long time ago if not for government subsidies. It’s ridiculous. Governments should spend on care for their people and not on a highly competitive industry like the airline business. If you get these out of the market, it will be a sound and efficient market.
WSJ: Do you think some European carriers will fail?

Mr. Kjos: The governments won’t keep on subsidizing the legacy carriers. I don’t know which will fail first, but we have seen a lot of bankruptcies over the past five years, and we will continue to see that.
WSJ: Thus far, you have built volume without relying on alliances. Will this change?

Mr. Kjos: In Europe, we have more than 400 routes — a larger network than the biggest legacy carriers. In the future it’s likely we will cooperate with low-cost carriers in the U.S. such as JetBlue or maybe Southwest. We don’t have any concrete talks ongoing because we are just starting up.

I think we will serve most of the big cities in the U.S. from Europe. We don’t have any geographic limitations — if we had been in an alliance, we couldn’t have set up the routes that we have today.
WSJ: Trans-Atlantic routes are competitive. How do you build a viable business with a route from Oslo to New York?

Mr. Kjos: It’s competitive in one way, but it’s very highly priced. If you do it correctly, you can offer substantially lower prices than competitors. The price level on trans-Atlantic routes will be considerably lower in the future [because] other low-cost carriers will come in this market.
WSJ: You had some problems with the first two Dreamliners you received. Has that affected your relationship with Boeing?

Mr. Kjos: You always have minor problems when you put new aircraft into operation. The first Dreamliner we got has been flying perfectly, but the second one was not so good at the beginning. So, we had put it on the ground and Boeing went over it nose to tail and after that it has been flying beautifully. . .they managed to get people to the moon, so obviously they can fix problems with a Dreamliner.
WSJ: How do you find the right balance between growth and making money?

Mr. Kjos: Scalability is very important. Today we need at least 50 aircraft to make money, and in the future it’s likely that we’ll need 100. But if you can’t get overhead costs right, it’s risky business to grow.
WSJ: Do you have enough planes to scale?

Mr. Kjos: Today, we have three long-haul aircraft and we have eight Dreamliners on order. We need more aircraft to get good profitability. The problem with the Dreamliner is that they are hard to get hold of. For the first two years we have eight on order. Then we get into 2016, so we are in the process of securing more.
WSJ: You debuted as an author a few years ago. Tell us about it.

Mr. Kjos: I wrote about my days as a fighter pilot in the north. I plan to release another book next year, but that’s about Norwegian. Somebody has to write the story about the company, so I volunteered to do it.

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